This refers to the subject investigation conducted by the NRC Office of
Investigations (OI) at Northeast Nuclear Energy Company's (NNECo) Millstone
Station after you had informed the NRC, in September 1997, that separate
investigations by your Employee Concerns Program, as well as by your contractor,
Little Harbor Consultants, had found that two contractor employees in
your Motor Operated Valve (MOV) department, had been retaliated against
for engaging in protected activities. The OI investigation confirmed those
findings, noting that the terminations of the two contractor employees
constituted discrimination. The synopsis of the subject OI report was
forwarded to you with our letter, dated August 26, 1998. Although that
letter offered you the opportunity for an enforcement conference, you
declined a conference and instead sent the NRC a response, dated September
30, 1998, in which you admitted that the violation occurred, and also
described the causes and corrective actions.

The termination of the employment of the two contractor employees occurred
in August 1997, after the two individuals had raised concerns about the
MOV program manual and the process by which the manual was being reviewed.
The terminations were recommended by the then MOV Supervisor, and were
supported by the then MOV Manager, both of whom were also contractor employees.
Further, the recommendation was neither questioned nor objected to by
the Recovery Officer involved with management oversight of the MOV program
activities, after the MOV Manager briefed him on the recommendation, nor
was it questioned by other Departments within NNECo, including the Contracts
or Legal Departments during their reviews, as you acknowledged in your
September 30, 1998, letter to the NRC.

One of the contractor engineers, who had raised questions regarding the
adequacy of the MOV program manual, requested a copy of the manual for
his review on or about July 22, 1997. Although the MOV Supervisor had
indicated, in a meeting with his staff that day, that he would provide
the manual for review the next day after incorporating some revisions,
the individual was not provided a copy by the MOV Supervisor, and the
supervisor had sent an email to his department indicating that no one
had requested to review the manual. In a telephone conversation on July
23, 1997, the individual questioned the MOV Supervisor about the process
for review of the manual. The supervisor requested that the individual
come to the MOV Manager's office to discuss the issue. After the individual
refused to come to the MOV Manager's office despite repeated requests,
the supervisor considered the individual's actions to be insubordinate.
The supervisor contends this insubordination was the principal basis for
recommending termination of the individual's employment.
The MOV Supervisor also contended that he had additional performance-related
reasons to recommend termination of the contractor's employment. He contended
that the contractor employee had not completed an assignment and had worked
on several projects outside the scope of his assigned duties without approval.
However, there was no evidence documenting such problems at the time they
occurred, nor was there evidence that the MOV Supervisor brought such
issues to the contractor employee's attention.

The second contractor engineer had also expressed a desire to the MOV
Supervisor to complete a review of the MOV program manual for adequacy
and accuracy. He had principal responsibility for a critical item that
would be incorporated in the manual, and had raised issues relating to
the completion of the manual. The MOV Supervisor sought this contract
employee's termination because of an alleged failure to meet deadlines
and because of an incident in which the employee had allegedly raised
his voice with the MOV Supervisor and threatened to quit. Similar to the
first contractor employee, the MOV Supervisor had not documented perceived
performance problems involving the second contractor employee at the time
of occurrence.

Notwithstanding the MOV Supervisor's articulated reasons for seeking the
termination of the two contractor employees, the NRC has concluded that
the terminations were motivated, at least in part, by the individuals'
engagement in protected activities. The recommendation for termination
that was made was close in time to the protected activities. Further,
although the supervisor stated that he had other concerns regarding the
individuals' performance since at least June 1997, as noted, these concerns
were not discussed with the individuals nor were they documented in the
supervisor's log book until July 22, 1997, two days before the MOV Supervisor
recommended the terminations to NNECo's Contracts Department. In addition,
OI's investigation elicited evidence that the MOV Supervisor and Manager
felt pressure to complete the MOV program manual in accordance with NNECo's
schedule and perceived the two contractor employees as roadblocks in that
effort.

While the NRC is concerned with the termination recommendations made by
the then MOV Supervisor, and the support for them by the then MOV Manager,
the NRC is equally concerned with the failures by the responsible Recovery
Officer, as well as other departments within NNECo, including the Contracts
and Legal Departments, who had the opportunity to question the appropriateness
of the recommended terminations but failed to do so. As noted in the Little
Harbor report, both the Contracts and Legal Departments failed to recognize
the potential for retaliation during the termination review process. The
Little Harbor report also noted that neither Department asked for any
substantiation of the alleged performance issues that were the basis for
the terminations, even though the Contracts Department had been provided
some knowledge about problems within the MOV Department. In fact, the
actual letters releasing the individuals were prepared by NNECo's Contracts
Department. Further, as also noted in the Little Harbor report, your senior
management was slow in recognizing and responding to the indications of
retaliation.

The NRC recognizes that subsequent to these findings, you took significant
action to reverse the terminations, as well as improve the climate at
the Millstone station to ensure that a work environment exists such that
employees feel free to raise safety concerns. Nonetheless, the actions
by the then MOV Supervisor and MOV Manager in recommending the terminations,
and the lack of questioning the appropriateness of the terminations by
the responsible Recovery Officer, as well as other NNECo Departments,
resulted in a significant violation of the employee protection standards
set forth in 10 CFR 50.7. Given that individuals above a first line supervisor
contributed to the violation, the violation is categorized at Severity
Level II in accordance with the NRC Enforcement Policy, "General Statement
of Policy and Procedures for NRC Enforcement Actions," NUREG-1600 (Enforcement
Policy).

In accordance with the Enforcement Policy, a base civil penalty in the
amount of $88,000 is considered for a Severity Level II violation. Since
this case involves a Severity Level II violation, the NRC considered whether
credit was warranted for Identification and Corrective Action in accordance
with the civil penalty assessment process in Section VI.B.2 of the Enforcement
Policy. Credit is warranted for Identification since the violation was
initially identified by your Employee Concerns Program. Credit is also
warranted for Corrective Actions which were considered comprehensive.
These actions, which were described in your March 31, 1998, and September
30, 1998 letters to the NRC, included, but were not limited to: (1) rescinding
the terminations, retracting the termination letters, and offering reinstatement
to the two individuals whose employment was terminated; (2) conduct of
an Employee Concerns Oversight Panel survey in September 1997 to ensure
that there was no lingering effect in the MOV department; (3) conduct
of a self-assessment by the Contracts Department in October 1997 to preclude
repetition; (4) conduct of a meeting of all first line and above supervisors
to discuss the topic of a safety conscious work environment; and (5) creation
of an Executive Review Board to review all proposed discipline more severe
than a verbal warning.

However, the enforcement policy also states that Severity Level I or II
violations should normally result in a civil penalty regardless of the
consideration of identification and corrective action. Consistent with
the policy, and to emphasize the significance that the NRC attaches to
any finding of discrimination, as well as the importance of current management
ensuring a safety conscious work environment where employees feel free
to raise safety concerns, a civil penalty is warranted in this case, particularly
given: (1) the failures by the responsible Recovery Officer
and the Contracts and Legal Departments to question the basis for the
proposed terminations, despite the opportunities to do so; (2) the failures
by senior management in not identifying the management problems in the
MOV Department in sufficient time to prevent the terminations, and in
being slow in recognizing and responding to the indications of retaliation,
as noted in the Little Harbor report; (3) the failure by management to
provide training to its contractor supervisors relating to the NRC's employee
protection regulation, notwithstanding the Commission's Order dated October
24, 1996, concerning the need to address actions involving a lack of a
safety conscious work environment, and to ensure that employees can raise
safety concerns without fear of retaliation; and (4) the past history
of discrimination violations involving the Millstone station, as evidenced
by the three discrimination civil penalties issued between 1993 and 1996.
Therefore, I have been authorized, after consultation with the Director,
Office of Enforcement, and the Deputy Executive Director for Nuclear Reactor
Regulation, Regional Operations, and Research, to propose a base civil
penalty in the amount of $88,000 for the violation set forth in the enclosed
Notice. But for your identification of the violation in September 1997,
as well as your prompt rescission of the terminations of the two individuals,
the civil penalty amount would have been higher.

The NRC has concluded that information regarding both the reason for the
violation, and the corrective actions taken and planned to correct the
violation and prevent recurrence, are already adequately addressed on
the docket in your September 30, 1998 letter. Therefore, you are not required
to respond to the provisions of 10 CFR 2.201 unless the description therein
does not accurately reflect your corrective actions or your position.
In that case, or if you choose to provide additional information, you
should follow the instructions specified in the enclosed Notice. The NRC
will use your response, in part, to determine whether further enforcement
action is necessary to ensure compliance with regulatory requirements.

In accordance with 10 CFR 2.790 of the NRC's "Rules of Practice," a copy
of this letter, and your response will be placed in the NRC Public Document
Room (PDR).

During an NRC investigation conducted by the NRC Office of Investigations
(OI), a violation of NRC requirements was identified. In accordance with
the "General Statement of Policy and Procedure for NRC Enforcement Actions,"
NUREG-1600, the NRC proposes to impose a civil penalty pursuant to Section
234 of the Atomic Energy Act of 1954, as amended (Act), 42 U.S.C. 2282,
and 10 CFR 2.205. The particular violation and associated civil penalty
are set forth below:

10 CFR 50.7 prohibits, in part, discrimination by a Commission
licensee against an employee or contractor for engaging in certain protected
activities. Discrimination includes discharge or other actions relating
to the compensation, terms, conditions, and privileges of employment.
The activities which are protected include, but are not limited to, reporting
of safety concerns by an employee to his employer.

Contrary to the above, between July and August 1997, the licensee discriminated
against two contractor employees within the Motor Operated Valve (MOV)
Department due to their involvement in protected activities. Specifically,
the employment of the contractor employees was terminated in August 1997,
at least in part because the individuals had raised concerns about the
MOV program manual and the process by which it was being reviewed. Each
of the two terminations constitutes a separate instance of discrimination
which is being combined as one violation. (01012)

Pursuant to the provisions of 10 CFR 2.201, Northeast Nuclear Energy
Company (NNECo or Licensee) is hereby required to submit a written statement
or explanation to the Director, Office of Enforcement, U.S. Nuclear Regulatory
Commission, within 30 days of the date of this Notice of Violation and
Proposed Imposition of Civil Penalty (Notice). This reply should be clearly
marked as a "Reply to a Notice of Violation" and should include for each
alleged violation: (1) admission or denial of the alleged violation; (2)
the reasons for the violation if admitted, and if denied, the reasons
why; (3) the corrective steps that have been taken and the results achieved;
(4) the corrective steps that will be taken to avoid further violations;
and (5) the date when full compliance will be achieved. However, the NRC
has concluded that information regarding the reason for the violation,
and the corrective actions taken and planned to correct the violation
and prevent recurrence, is already adequately addressed on the docket
in NNECo's September 30, 1998 letter. Therefore, NNECo is not required
to respond pursuant to 10 CFR 2.201 unless the description therein does
not accurately reflect NNECo's corrective actions or its position. Consideration
may be given to extending the response time for good cause shown. Under
the authority of Section 182 of the Act, 42 U.S.C. 2232, this response
shall be submitted under oath or affirmation.

Within the same time as provided for the response required above under
10 CFR 2.201, the Licensee may pay the civil penalty by letter addressed
to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission,
with a check, draft, money order, or electronic transfer payable to the
Treasurer of the United States in the amount of the civil penalty proposed
above, or the cumulative amount of the civil penalties if more than one
civil penalty is proposed, or may protest imposition of the civil penalty
in whole or in part, by a written answer addressed to the Director, Office
of Enforcement, U.S. Nuclear Regulatory Commission. Should the Licensee
fail to answer within the time specified, an order imposing the civil
penalty will be issued. Should the Licensee elect to file an answer in
accordance with 10 CFR 2.205 protesting the civil penalty, in whole or
in part, such answer should be clearly marked as an "Answer to a Notice
of Violation" and may: (1) deny the violations listed in this Notice,
in whole or in part; (2) demonstrate extenuating circumstances; (3) show
error in this Notice; or (4) show other reasons why the penalty should
not be imposed. In addition to protesting the civil penalty in whole or
in part, such answer may request remission or mitigation of the penalty.

In requesting mitigation of the proposed penalty, the factors addressed
in Section VI.B.2 of the Enforcement Policy should be addressed. Any written
answer in accordance with 10 CFR 2.205 should be set forth separately
from the statement or explanation in reply pursuant to 10 CFR 2.201, but
may incorporate parts of the 10 CFR 2.201 reply by specific reference
(e.g., citing page and paragraph numbers) to avoid repetition. The attention
of the Licensee is directed to the other provisions of 10 CFR 2.205, regarding
the procedure for imposing a civil penalty.

Upon failure to pay any civil penalty due which subsequently has been
determined in accordance with the applicable provisions of 10 CFR 2.205,
this matter may be referred to the Attorney General, and the penalty,
unless compromised, remitted, or mitigated, may be collected by civil
action pursuant to Section 234c of the Act, 42 U.S.C. 2282c.

The response noted above (Reply to Notice of Violation, letter with payment
of civil penalty, and Answer to a Notice of Violation) should be addressed
to: Mr. James Lieberman, Director, Office of Enforcement, U.S. Nuclear
Regulatory Commission, One White Flint North, 11555 Rockville Pike, Rockville,
MD 20852-2738, with a copy to the Regional Administrator, U.S. Nuclear
Regulatory Commission, Region I and a copy to the NRC Resident Inspector
at the facility that is the subject of this Notice. Because your response
will be placed in the NRC Public Document Room (PDR), to the extent possible,
it should not include any personal privacy, proprietary, or safeguards
information so that it can be placed in the PDR without redaction. If
personal privacy or proprietary information is necessary to provide an
acceptable response, then please provide a bracketed copy of your response
that identifies the information that should be protected and a redacted
copy of your response that deletes such information. If you request withholding
of such material, you must specifically identify the portions of your
response that you seek to have withheld and provide in detail the bases
for your claim of withholding (e.g., explain why the disclosure of information
will create an unwarranted invasion of personal privacy or provide the
information required by 10 CFR 2.790(b) to support a request for withholding
confidential commercial or financial information). If safeguards information
is necessary to provide an acceptable response, please provide the level
of protection described in 10 CFR 73.21.